ABSTRACT: New data on air fares offered on 29 trans-Tasman and domestic New
Zealand routes are analysed to test whether competition between
traditional or legacy airlines still matters for pricing in the new air
travel regime characterised by internet booking systems and competition
from low cost carriers. It is found that market structure does indeed
still matter. Air fares are significantly lower on those domestic New
Zealand routes where Air New Zealand faces competition from Qantas. In
addition, on the trans-Tasman routes, the new entrants Virgin (Pacific)
Blue and Emirates have put competitive pressure on Air New Zealand and
Qantas, but such pressure would not be sufficient to compensate for
loss of independent competition between the larger incumbents.